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Telemedicine Fraud and Abuse Under the Microscope
Session 232, February 14, 2019
Douglas Grimm, Esq., Arent Fox LLP
Hillary Stemple, Esq., Arent Fox LLP
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Douglas Grimm, Esq.
Has no real or apparent conflicts of interest to report.
Hillary Stemple, Esq.
Has no real or apparent conflicts of interest to report.
Conflicts of Interest
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• Fraud and Abuse Rules of the Road
• Implications for:
– Direct to Consumer (i.e., cash pay)
– Commercial Payers
– Federal Payers (e.g., Medicare, Medicaid, Tricare)
• Recent Enforcement Trends and Actions
Agenda
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• Identify federal and state laws that pose regulatory risk to
telehealth arrangements
• Discuss telehealth arrangements that could implicate federal and
state fraud and abuse laws
• Analyze OIG guidance regarding telehealth arrangements and
implications for other telehealth providers
• Analyze how telehealth arrangements can comply with federal and
state laws and the risks associated with non-compliance
• Assess current enforcement trends and what telehealth providers
should take from these trends
Learning Objectives
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Rules of the Road
An overview of the fraud and abuse rules governing telemedicine
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• Prohibits a physician from referring Medicare or Medicaid patients
for designated health services (“DHS”) to an entity with which the
physician (or immediate family member) has a financial
relationship, unless an exception applies
• Prohibits the entity from submitting claims to Medicare or
Medicaid for services resulting from a prohibited referral
• Strict liability statute – must meet all elements of an exception or
the statute has been violated
Federal Laws – Stark Law (42 U.S.C. § 1395nn)
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• Civil Liability (not criminal)
• Potential Penalties
– Overpayment/refund obligation
– False Claims Act liability
– Civil Monetary Penalties
– Exclusion
• Government interpretation of the law is evolving
– HHS vs. DOJ
Federal Laws – Stark Law
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• Physician (or immediate family member)
• Financial relationship
• DHS entity
• Referrals by physician for Medicare or Medicaid services
• Strict liability
Federal Laws – Stark Law
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• Different exceptions for ownership and/or compensation
arrangements; common exceptions for telemedicine
include:
– Employment relationships
– Personal services arrangements
– Space and equipment leasing arrangements
– Fair market value (“FMV”) compensation arrangements
– In-office ancillary services
– Indirect compensation arrangements
– Electronic prescribing and electronic health records items and
services
Federal Laws – Stark Law
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• Exceptions generally require:
– Signed, written agreement
– Commercially reasonable, FMV compensation
– Compensation does not reflect the volume/value of referrals
Federal Laws – Stark Law
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• Example of arrangement implicating the Stark law:
– Hospital engages a physician (or physician group) to provide
on-call telestroke services
– Arrangement includes compensation for physician’s services
and equipment to facilitate the telestroke assessment
• Any referrals by physician to the hospital for DHS implicate the
Stark law (whether or not related to telestroke services)
• HIPAA-secure transmission? Encryption?
Federal Laws – Stark Law
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Prohibits the knowing and willful offer or payment of or the
solicitation or receipt of "remuneration" to induce or reward patient
referrals or the generation of business involving any item or service
payable by the Federal health care programs (e.g., drugs, supplies,
or health care services for Medicare or Medicaid patients)
Federal Laws – Anti-Kickback Statute (42 U.S.C.
§ 1320a-7b(b))
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• Criminal law
• Applies to payers and recipients of kickbacks
• Each party's intent is a key element of their liability under the AKS
– only “one purpose” needs to be to induce the purchase of a
product or service or to reward referrals
• Certain “safe harbor” protections (42 C.F.R. § 1001.952)
• Penalties include criminal (jail) and civil (monetary) penalties, and
FCA liability
Federal Laws – Anti-Kickback Statute
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• Elements of an AKS violation
– Remuneration
– Offered, paid, solicited, received
– To induce or reward referrals of Federal health care
programs – Medicare, Medicaid, and TRICARE
– Knowingly and willfully
– “One-Purpose” test
Federal Laws – Anti-Kickback Statute
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• “Remuneration”
– Cash
– Free equipment
– Excessive compensation for medical directorships or
consultancies or compensation where no legitimate services
are provided
– Provision of office assistance
– Certain reimbursement services
– Free rent
– Expensive hotel stays, meals, travel, etc.
Federal Laws – Anti-Kickback Statute
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• AKS Safe Harbors
– No liability if all elements of safe harbor are met
– Not an automatic violation if activities do not fit squarely in a
safe harbor
– The closer an activity or arrangement comes to satisfying
the requirements of a safe harbor, the safer the activity or
arrangement
Federal Laws – Anti-Kickback Statute
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• Examples of common AKS Safe Harbors for
Telemedicine:
– Bona fide employment
– Personal services agreements
– Leases for space or equipment
– Electronic prescribing and electronic health records
items and services
Federal Laws – Anti-Kickback Statute
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Safe Harbor General Requirements
– Agreement covers all services to be provided by one party to
another
– Aggregate services provided do not exceed those which are
reasonably necessary to accomplish the commercially
reasonable business purpose
– Aggregate compensation, set in advance, consistent with
FMV, not determined in a manner that takes into account the
volume or value of referrals or other business generated
Federal Laws – Anti-Kickback Statute
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• Example of arrangement implicating the AKS:
– Pharmacy contracts with group practice to have physicians
provide assessments of pharmacy patients via telemedicine
as part of pharmacy’s expansion into primary care services
– Pharmacy compensates physicians and provides equipment
to facilitate telemedicine consultations
– Physicians may refer patients to the pharmacy for fulfillment
of prescriptions, but referrals aren’t required under the terms
of the arrangement
Federal Laws – Anti-Kickback Statute
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Advisory Opinions
• Provide guidance on OIG’s interpretation of AKS
• Binding only as to requesting parties, but can provide
guidance with respect to similar factual situations
• OIG approved 5 telemedicine-related opinions
– AKS implicated by the arrangements, but no sanctions
• After 7-year lull, a new telemedicine Advisory Opinion
was issued on May 24, 2018
Federal Laws – Anti-Kickback Statute
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Facts:
• Sublease arrangement
involving ophthalmologist
subleasing equipment to
optometrist
• Optometrist sent images to
ophthalmologist for
interpretation
• Ophthalmologist provided free
consultations via telemedicine
Analysis:
• Sublease ok – all elements of
equipment safe harbor were met
• Free telemedicine consultations were
remuneration
• Arrangement approved because
optometrist would not advertise or bill
for consults and patients free to
choose any ophthalmologist
Advisory Op. 98-18
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Facts:
• Health system develops
telemedicine program for
specialist consultation services
for low-income children in rural
areas
• School nurses visit with children
and consult with specialists via
telemedicine
• Consults not reimbursable
under Medicaid or CHIP
Analysis:
• Remuneration included: free
telecomm equipment to the schools;
free consults for the patients;
additional opportunities for consulting
practitioners to earn professional fees
(future opportunities)
• Low risk b/c services not billable
• Safeguard: students needing follow-up
referred to local provider
• Public benefit in access to services for
low-income children
Advisory Op. 04-07
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Facts:
• Health system provides
emergency telestroke consults
to community hospitals
• System provides: technology,
consults, clinical protocols,
training, education, and
commitment to accept transfers
• Hospitals provide:
communication lines,
connectivity, and CT scanners
• Hospitals are referral source for
the health system
Analysis:
• Safeguards include: no required
referrals, patient freedom of choice,
participating hospitals not included in
program based on referral history
• Medicare is not billed so less risk to
federal health care programs
• Benefits include: improved quality of
care and patients receiving treatment
sooner (rather than needing to be
transferred to health system)
Advisory Op. 11-12
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Facts:
• FQHC “look-alike” to provide county
health clinic technology-related
equipment and services to facilitate
telemedicine encounters with county
clinic’s patients
• Items and services paid for using
State Department of Health grant
• Telemedicine items and services
used only for encounters related to
HIV prevention, including
prescription of meds for pre-
exposure and post-exposure
prophylaxis
• County clinic could use telemedicine
items to refer to FQHC-like provider
or other providers
• Both parties may submit claims to
federal payers
Analysis:
• Safeguards against patient steering,
including no referral requirements between
parties or to a provider’s pharmacy
• None of the telemedicine technology would
limit or restrict compatibility with other
technologies
• Unlikely to increase costs to federal payers
because billed items/services would have
been provided regardless of the
arrangement
• Increased access to preventative services
primarily benefit patients, not the providers
Advisory Op. 18-03
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• Prohibitions include:
– Knowingly submitting or causing to be submitted false
or fraudulent claims
– Knowingly making, using, or causing to be made or
used, false records or statements material to a false or
fraudulent claim
• Penalties
– Treble damages
– Penalties currently $11,181 - $22,363 per false claim
(adjusted annually)
Federal Laws – False Claims Act (31 U.S.C. §
3729 et seq.)
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• Examples of potential FCA violations related to telemedicine:
– Referrals made in violation of Stark law or AKS
– Claims submitted to Medicare where patient was not located
at a qualifying originating site
– Claims submitted to Tricare for prescriptions where doctors
did not properly consult with the Tricare beneficiary
(Example - consulting with the patient over the telephone
rather than via a real-time A/V consult)
Federal Laws – False Claims Act
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• State law versions of:
– Stark Law (prohibition against self-referral)
– Anti-Kickback Statute (often including prohibitions against
“fee splitting”)
– False Claims Act
• Scope of state laws vary
– Medicaid-only
– Medicaid and commercial
– Commercial
– “All-payer”
State Laws
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• Telemedicine laws
– Establishing the requirements for the practice of medicine
via telemedicine, including the requirements for a valid
telemedicine visit in the state
• Corporate Practice of Medicine
State Laws
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How the Governing Laws
Affect Different Telemedicine
Models
Implications for reimbursement by different payers
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• Federal laws generally not implicated
– But, companies should take steps to ensure patients aren’t
submitting claims for reimbursement, which could implicate
federal laws
• State “all-payer” laws may cover cash-only models
– Implications if company has an arrangement for services
with another company (e.g., pharmacy, DME)
Direct-to-Consumer Model
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• Telemedicine laws
– Board of Medicine administrative sanctions
– Loss of license
– Potential reporting to National Practitioner Data Bank
• Corporate Practice of Medicine laws
– Penalties are state-specific
– Criminal, civil, administrative
Direct-to-Consumer Model
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• State laws (depending on scope of the laws)
– Penalties vary by state, but may include criminal, civil, or
administrative penalties
– Potential state FCA liability
• Network contract requirements
• Telemedicine reimbursement laws (e.g., state parity laws)
• Telemedicine laws
• Corporate Practice of Medicine laws
Commercial Payer Model
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• Federal laws
– Possible criminal, civil, and administrative
– FCA liability
• State laws (including Medicaid)
• Telemedicine laws
• Corporate Practice of Medicine laws
Federal Payer Model
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Recent Enforcement Trends
and Actions
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• As federal dollars spent on telemedicine increase, enforcement
actions will increase
• Unnecessary prescription of compounded drugs currently is a
significant target (Tricare settlements)
– Pain creams
• While more enforcement is expected with increasing federal
dollars, already seeing enforcement in private sphere touching
telemedicine
Enforcement Trends
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• October 2018 DOJ announcement
• Telemedicine company, HealthRight LLC and its CEO pleaded
guilty to felony conspiracy and wire fraud charges related to a
scheme in which the company allegedly fraudulently solicited
insurance information and prescriptions for the pain cream from
patients across the country
• Telemedicine physicians approved the prescriptions
• Charges pending against 7 compounding pharmacies and 4
individuals associated with the pharmacies
• Scheme also involved significantly marking up the cost of the pain
creams, where the elevated costs were then charged to private
insurance companies
• Insurers ultimately paid $174M for prescriptions
Indictments and Guilty Pleas in $1B Fraud
Scheme Involving Telemedicine
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• Defendants (including physician, physician assistant, and
pharmacist) operated a call center targeting Tricare beneficiaries
for unnecessary compound medications
• Clinician defendants provided signed prescriptions for Tricare
patients without valid provider-patient interactions in exchange for
kickbacks
• Pharmacist defendant (1) provided prescriptions to clinicians to be
signed and returned to pharmacy; (2) filled prescriptions and
submitted false claims to Tricare; and (3) paid kickbacks to
defendants operating the call center in exchange for referrals
Fraud Investigations: U.S. v. Jackson et al. (M.D.
Fl., Docket. No. 8:16-cr-264) (2016)
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• Florida pharmacy settlements related to Tricare
(2017)
– Express Plus Pharmacy, LLC: $170K
• Related to the submission of claims to Tricare for
compounded medications such as pain creams
• Claims were not reimbursable because:
– Not issued pursuant to a valid physician-patient relationship;
– Prescriptions were issued after brief telephone calls, which violated
applicable telemedicine laws;
– Prescriptions were medically unnecessary; and
– Prescriptions were tainted by kickbacks to marketers
• Resolved allegations related to prescriptions from one
physician
Other DOJ Settlements
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• Tricare covers in-person, interactive A/V communications for
telemedicine services including: clinical consultations, office visits,
telemental health, and services for ESRD
• Providers must guarantee the patient is appropriate for treatment
via telemedicine
• Home-based telemedicine must be directed through a DoD-
approved HIPAA confirmed platform
• Provider/patient must agree upon back-up plan if communication
fails; provider must document
Tricare and Telemedicine
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• Florida pharmacy settlements related to
Tricare (2018)
– Healthy Meds Pharmacy Corp.: $350K
• Related to filling prescriptions in violation of
Tricare’s policy on telemedicine, engaging in
unsolicited calls to Tricare beneficiaries, and
providing medically unnecessary compound
medications to beneficiaries
Other DOJ Settlements
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• Anton Fry, M.D. and CPC Associates (2016): $36K
– Related to claims submitted to Medicare for psychiatric
services that were provided via telephone
– Patients were not located in a HPSA and physician did not
use real-time A/V communications for the services
Other DOJ Settlements
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• Generally 5 conditions for coverage under Medicare
– Beneficiary is located in qualifying rural area (HPSA)
– Beneficiary is located at a qualifying “originating site”
– Services provided by 1 of 10 eligible “distant site
practitioners”
– Beneficiary and distant site practitioner communicate
via interactive, real-time A/V communication
– CPT/HCPCS code for the service is included on list of
covered Medicare telehealth services
Medicare Requirements (Refresher)
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• Added to OIG Work Plan in 2017
• OIG Report issued April 2018: “CMS Paid Practitioners For
Telehealth Services That Did Not Meet Medicare Requirements
OIG Review of Medicare Payments for
Telehealth Services
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• Findings:
– 31 out of 100 claims did not meet Medicare
requirements
• 24 claims unallowable because beneficiaries received services
at non-rural originating sites
• 7 claims billed by ineligible institutional providers
• 3 claims for services to beneficiaries at unauthorized originating
sites
• 2 claims for services provided by unallowable means of
communication
• 1 claim for noncovered service
• 1 claim for services provided by a physician located outside the
U.S.
OIG Review of Medicare Payments for Telehealth
Services
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• Findings:
– By extrapolation, improperly paid estimated $3.7 million
during the audit period (2014-2015)
• Dollar amount is relatively low, but accounts for approximately
27% of all Medicare dollars spent on telehealth services during
the audit period
• Compare to 9.51% overall error rate for FY 2017 (July 1, 2015
– June 30, 2016)
• OIG recommended CMS:
– Conduct periodic postpayment reviews of telehealth services
– Work with Medicare contractors to implement required
telehealth claim edits listed in Claims Processing Manual
– Offer education and training to practitioners on Medicare
telehealth requirements
OIG Review of Medicare Payments for Telehealth
Services
